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The Student Loan Crisis is all Hype

Avoiding student loan crisis
While the nation’s student loan debt has pushed passed the $1 trillion mark, passing total credit card debt, and even slowly gaining on the outstanding mortgage debt, some sources say there’s no reason to panic.

Despite the fact that more than 50 percent of graduating students leave college with outstanding debt, a CNNMoney article claims experts aren’t scared this debt is creating another financial bubble.

“I don’t think it’s a bubble,” Mark Kantrowitz, a publisher for Finaid.org, told CNNMoney. “Most students who graduate college are able to repay their loans.”

But Are They?

Rallying students have been wearing Guy Fawkes masks, holding aggressive picket signs, and shouting angrily at the injustice they feel they’ve been subjected to. What is that injustice? In their eyes, the predatory practices of federal and private student loan lenders.

It seems like every week there are news reports of students carrying six-digit debt figures that have been derived from college financing.

And, according to Finaid.com, the individual debt figures are on the rise, averaging at $27,200 per student in the 2010-11 school year—up a full 54 percent from a decade earlier.

With outstanding debt on individual’s student loans totaling near that of a mortgage down payment, we have to ask ourselves whether student really can repay their loans, as Kantrowitz suggests.

Debt Burden No Other Generation Has Had

Debt has typically come from mortgages, auto financing, and credit card debt. But student loans are a relatively new debt burden that no other generation has had to deal with. Now, our young work force is leaving their educational studies with huge amounts of debt already strapped to their shoulders.

“Having a lot of student debt can make a person’s life very difficult,” said Laren Asher, president of the Project on Student Debt, to CNNMoney.

Owing close to $30,000 by the time a young adult is 22 or 23 years old is distressing at best, and completely destructive at worst. It delays the purchase of property, the beginning of families, and the institution of marriage.

If the job market is slow, as it is today, students carrying debt are forced to weather an increasing balance as their interest rates climb while their student loans are in forbearance.

Despite these factors, however, Kantrowitz isn’t concerned. He believes that while we will likely see student loan defaults continue to rise for another year, they will drop off as unemployment rates decrease.